Mark R. Stanhope CPA PC

10/15/2025

Enhanced SALT Tax Break Will Help Many Homeowners
The One Big Beautiful Bill Act (OBBBA), enacted on July 4, will allow more taxpayers to fully deduct their state and local tax (SALT) expenses (including property tax). Here are the details.

SALT Deduction Expanded
Under the Tax Cuts and Jobs Act, the itemized deduction for SALT was limited to $10,000 ($5,000 for married individuals who file separately) beginning in 2018.

This limitation negatively affected taxpayers living in locations with high state income tax rates and those who pay high property taxes because:

They live in a high-property-tax jurisdiction,
They live in a location with high property values,
They own an expensive home, or
They own both a primary residence and one or more vacation homes.
Under the OBBBA, for 2025 through 2029, the SALT deduction limit increases from $10,000 to $40,000 (or $20,000 for separate filers) with 1% annual inflation adjustments. So, for 2026, the cap will be $40,400 ($20,200 for separate filers).

But unless Congress takes further action, the SALT deduction limit is scheduled to revert to the prior-law limit of $10,000 ($5,000 for separate filers) in 2030.

10/15/2025

Say Goodbye to Paper Checks
Beginning Sept. 30, 2025, the federal government will generally no longer issue paper checks, including those for tax refunds, Social Security benefits and more. Also, certain federal agencies, such as the IRS and the Dept. of Labor (DOL), will generally stop accepting payments by paper check. This is part of a program to modernize payments, improve efficiency in processing payments and reduce administrative burdens. Historically, the government stated that checks issued by the Dept. of the Treasury are more likely to be lost, stolen or subject to other forms of fraud.

The IRS will publish detailed guidance for 2025 tax returns before the 2026 filing season begins. Until further notice, taxpayers should continue using existing forms and procedures, including those filing their 2024 returns on extension of a due date prior to Dec. 31, 2025. Contact the office with questions.

07/24/2024

Renting to family members:
Renting property to family members means you risk losing the ability to deduct rental expenses. That's because use by family members is considered personal use, even if your relative pays rent unless two requirements are met. The family member:

Uses the property as a principal residence and Pays fair market rent (not discounted). If these requirements aren't met, you must report the rental income (if you rented the property for 15 days or more per year). But related expenses won't be deductible.

To avoid losing valuable tax benefits, set the rent at or above fair market value and document fair market rent with comparable local rental rates. If you give family members financial gifts to help with the rent, the IRS will likely view this as discounted rent.

Know What You're Getting Into
Helping family members with housing expenses is a nice thing to do. But be aware of the tax consequences of renting to relatives. Contact the office for assistance with these decisions.

02/08/2024

Traveling for Business in 2024? What's Deductible?

If you and your employees will be traveling for business this year, there are many factors to keep in mind. Under the tax law, certain requirements for out-of-town business travel within the United States must be met before you can claim a deduction. The rules apply if the business conducted reasonably requires an overnight stay.

Note: Under the Tax Cuts and Jobs Act, employees can't deduct their unreimbursed travel expenses through 2025 on their own tax returns. That's because unreimbursed employee business expenses are "miscellaneous itemized deductions" that aren't deductible through 2025. Self-employed individuals can continue to deduct business expenses, including away-from-home travel expenses.

Rules That Come Into Play
The actual costs of travel (for example, plane fare and cabs to the airport) are generally deductible for out-of-town business trips. You're also allowed to deduct the cost of lodging. And a percentage of your meals is deductible even if the meals aren't connected to a business conversation or other business function. For 2024, the law allows a 50% deduction for business meals. No deduction is allowed for meal or lodging expenses that are "lavish or extravagant," a term that generally means "unreasonable." Also, personal entertainment costs on trips aren't deductible, but business-related costs such as those for dry cleaning, phone calls and computer rentals can be written off.

Mixing Business With Pleasure
Some allocations may be required if the trip is a combined business/pleasure trip; for example, if you fly to a location for four days of business meetings and stay on for an additional three days of vacation. Only the costs of meals, lodging and so on incurred during the business days are deductible, not those incurred for the personal vacation days.

On the other hand, with respect to the cost of the travel itself (for example, plane fare), if the trip is primarily for business purposes, the travel cost can be deducted in its entirety and no allocation is required. Conversely, if the trip is primarily personal, none of the travel costs are deductible. An important factor in determining if the trip is primarily business or personal is the amount of time spent on each (though this isn't the sole factor).

Suppose a trip isn't for the actual conduct of business but is for the purpose of attending a convention or seminar. The IRS may check the nature of the meetings carefully to make sure they aren't vacations in disguise, so retain all material helpful in establishing the business or professional nature of this travel.

Also, personal expenses you incur at home related to the trip aren't deductible. This might include costs such as boarding a pet while you're away.

Is Your Spouse Joining You?
The rules for deducting the costs of a spouse who accompanies you on a business trip are very restrictive. No deduction is allowed unless the spouse is an employee of yours or of your company. If that isn't the case, then even if there's a bona fide business purpose for having your spouse make the trip, you probably won't be able to fully deduct his or her travel costs (though you can deduct some costs).

Specifically, the restrictions apply only to additional costs incurred by having your non-employee spouse travel with you. For example, the expense of a hotel room or for traveling by car would likely be fully deductible since the cost to rent the room or to travel alone or with another person would be the same, even in a rented car.

Before You Hit the Road
Contact the office with any questions you may have about travel deductions to help you stay in the right lane.

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How to Secure a Tax Benefit with the QBI Deduction
QBI may sound like the name of a TV quiz show. But it's actually the acronym for "qualified business income," which can trigger a tax deduction for some small business owners or self-employed individuals. The QBI deduction was authorized by the Tax Cuts and Jobs Act (TCJA), and it took effect in 2018.

How It Works
The deduction is still available to owners of pass-through entities - such as S corporations, partnerships and limited liability companies - as well as self-employed individuals. But it is scheduled to expire after 2025 unless Congress acts to extend it.

The maximum deduction is equal to 20% of QBI. Generally, QBI refers to your net profit, excluding capital gains and losses, dividends and interest income, employee compensation and guaranteed payments to partners. The deduction can be claimed whether or not you itemize.

Notably, the QBI deduction is subject to a phaseout based on your income. If your total taxable income is below the lowest threshold, you may be entitled to the full 20% deduction, although other limitations do apply:

For 2023, the thresholds are $182,100 for single filers and $364,200 for joint filers.
For 2024, the thresholds are $191,950 for single filers and $383,900 for joint filers.
But things get tricky if your income exceeds the applicable threshold. In that case, your ability to claim the QBI deduction depends on the nature of your business.

Specifically, the rules are different for regular business owners of pass-through entities, sole proprietors, and those who are in "specified service trades or businesses" (SSTBs). This covers most businesspeople who provide personal services to the public, such as physicians, attorneys, financial planners, and accountants. (Engineers and architects are excluded.) Professionals in this group forfeit the QBI deduction entirely if income exceeds another set of limits:

For 2023, these upper limits are $232,100 for single filers and $464,200 for joint filers.
For 2024, these upper limits are $241,950 for single filers and $483,900 for joint filers.
If your income falls between the thresholds stated above, your QBI deduction may be reduced, regardless of whether you're in an SSTB or not. For taxpayers who are in SSTBs, the deduction is phased out until it disappears at the upper-income threshold. For other taxpayers, the deduction is limited to the lesser of 20% of QBI or the greater of 1) 50% of the wages paid to employees on W-2s, or 2) 25% of wages plus 2.5% of the unadjusted basis of the qualified property owned by the business.

12/08/2023

Plan Your 2024 Retirement Contributions and Tax Tips:

As part of your planning for next year, now is the time to review funding your retirement accounts in 2024. Recent cost of living calculations mean much higher contribution limits for next year. The higher income phaseouts for eligibility will make many taxpayers eligible for fully-deductible contributions. So, you can take full advantage of this tax benefit.

First, here are the 2024 annual contribution limits for the more popular programs:

The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan, is increased to $23,000, up from $22,500.

The limit on annual contributions to an IRA increased to $7,000, up from $6,500. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment but remains $1,000 for 2024.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan, remains $7,500 for 2024. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan who are 50 and older can contribute up to $30,500 starting in 2024. The catch-up contribution limit for employees 50 and over participating in SIMPLE plans remains $3,500 for 2024.

In summary and a tax tip:
Identify the type(s) of retirement savings plans you currently use.
Note the annual savings limits of the plan to adjust your savings to take full advantage of the annual contributions. Remember, a missed year is a missed opportunity that does not return.
If you are 50 or older, add the catch-up amount to your potential savings total.

Take note of the income limits within each plan type? For traditional IRAs, if your income is below the noted threshold, your taxable income is reduced by your contributions. The deductibility of your contributions is also limited if your spouse has access to a plan.
In the case of Roth IRAs, the income limits restrict who can participate in the plan. Ask your accountant about back-door Roth IRAs.

If you have not already done so, also consider:
Setting up new accounts for a spouse or dependent(s)
You'll be able to use this time to review the status of your retirement plan, including beneficiaries.
Reviewing contributions to other tax-advantaged plans like Flexible Spending Accounts (health care and dependent care) and prepaid medical savings plans like Health Savings Accounts.

12/01/2023

Use the Tax Code to Make Business Losses Less Painful
Whether you're operating a new company or an established business, losses can happen. The federal tax code may help soften the blow by allowing businesses to apply losses to offset taxable income in future years, subject to certain limitations.

Qualifying for a Deduction
The net operating loss (NOL) deduction addresses the tax inequities that can exist between businesses with stable income and those with fluctuating income. It essentially lets the latter average out their income and losses over the years and pay tax accordingly.

Eligibility for the NOL deduction depends on having deductions for the tax year that exceed your income. The loss generally must be caused by deductions related to your:

Business (Schedules C and F losses, or Schedule K-1 losses from partnerships or S corporations),
Casualty and theft losses from a federally declared disaster, or
Rental property (Schedule E).
The following generally aren't part of the NOL determination:

Capital losses that exceed capital gains,
The exclusion for gains from the sale or exchange of qualified small business stock,
Nonbusiness deductions that exceed nonbusiness income,
The NOL deduction itself, and
The Section 199A qualified business income deduction.
Individuals and C corporations are eligible to claim the NOL deduction. Partnerships and S corporations generally aren't eligible, but partners and shareholders can calculate individual NOLs using their separate shares of business income and deductions.

Limitations
Prior to the Tax Cuts and Jobs Act (TCJA), taxpayers could carry back NOLs for two years and carry them forward 20 years. They also could apply NOLs against 100% of their taxable income.

The TCJA limits NOL deductions to 80% of taxable income for the year and eliminates the carryback of NOLs (except for certain farming losses). However, it does allow NOLs to be carried forward indefinitely.

If your NOL carryforward is more than your taxable income for the year you carry it to, you may have an NOL carryover. That's the excess of the NOL deduction over your modified taxable income for the carryforward year. If your NOL deduction includes multiple NOLs, you must apply them against your modified taxable income in the same order you incurred them, beginning with the earliest.

A Limit on Excess Business Losses
The TCJA also established an “excess business loss” limitation, effective beginning in 2021. For partnerships or S corporations, this limitation applies at the partner or shareholder level, after applying the outside basis, at-risk and passive activity loss limitations. Under the rule, noncorporate taxpayers' business losses can offset only business-related income or gain, plus an inflation-adjusted threshold. For 2023, that threshold is $289,000, or $578,000 if married filing jointly. For 2024, the thresholds are $305,000 and $610,000, respectively. Remaining losses are treated as an NOL carryforward to the next tax year. That is, you can't fully deduct them because they become subject to the 80% income limitation on NOLs, reducing their tax value.

Important: Under the Inflation Reduction Act, the excess business loss limitation applies to tax years beginning before January 1, 2029. Under the TCJA, it had been scheduled to expire after December 31, 2026.

Planning Ahead
The tax rules regarding business losses are complex, especially the interaction between NOLs and other potential tax breaks. Contact the office for help charting the best course forward.

11/09/2023

One-Time Thing: IRA to HSA transfer
Did you know you can transfer funds directly from your IRA to a Health Savings Account (HSA) without taxes or penalties? Under current law, you can make one such “qualified HSA funding distribution” during your lifetime.

Typically, if you have an IRA and an HSA, it's a good idea to contribute as much as possible to both to maximize their tax benefits. But if you're hit with high medical expenses and need more balance in your HSA, transferring funds from your IRA may be a solution.

Calling in the Cavalry
An HSA savings account can pay qualified medical expenses with pre-tax dollars. It's generally available to individuals with eligible high-deductible health plans. For 2023, the annual limit on tax-deductible or pre-tax contributions to an HSA is $3,850 for individuals with self-only coverage and $7,750 for individuals with family coverage. If you're 55 or older, the limits are $4,850 and $8,750, respectively. Those same limits apply to an IRA-to-HSA transfer, reduced by any contributions already made to the HSA during the year.

Here's an example illustrating the potential benefits of a qualified HSA funding distribution from an IRA: Joe is 58 years old with a self-only, high-deductible health plan. In 2023, he needs surgery for which he incurs $5,000 in out-of-pocket costs. Joe is strapped for cash, has yet to contribute to his HSA in 2023, and has only $500 left in his HSA, but he has a $50,000 balance in his traditional IRA. Joe may move up to $4,850 from his IRA to his HSA tax and penalty-free.

Considering Other Factors
If you decide to transfer funds from your IRA to your HSA, remember that the distribution must be made directly by the IRA trustee to the HSA trustee, and, again, the transfer counts toward your maximum annual HSA contribution for the year.

Also, funds transferred to the HSA, in this case, aren't tax deductible. But, because the IRA distribution is excluded from your income, the effect is the same (at least for federal tax purposes).

Exploring the Opportunity
IRA-to-HSA transfers are a once-in-a-lifetime opportunity, but they still must be the right move for everyone. Please contact our office to see if this step makes sense in your tax and financial circumstances.

07/17/2023

Unsure if you filed your 2022 or past returns correctly?

Haven't filed or need to resolve a tax problem?

We are offering free consultations for the month of July!

Call us at (978)568-9100 or submit an inquiry on our website

Mark R. Stanhope CPA, PC is a full service tax, accounting and business consulting firm that specializes in Tax Resolution Services with the IRS. We are located on Main Street in Hudson, MA.

06/04/2023

Many itemized deductions eliminated for tax years 2018-2025 and unless congress acts will return 2026. The tax law eliminates itemized deductions for:
▫ Unreimbursed employee expenses, such as mileage (previously deductible
to the extent they exceeded 2% of adjusted gross income)
▫ Tax preparation expenses
▫ Alimony payments (see details)
▫ Investment expenses
▫ Miscellaneous itemized deductions
▫ Moving expenses to move to a new job, and
▫ Personal casualty losses (except for losses associated with special disaster relief legislation).

09/09/2021

Tax Rules for Divorce and Alimony Payments
Divorce is a painful reality for many people, both emotionally and financially. Quite often, the last thing on anyone's mind is the effect a divorce or separation will have on their tax situation. To make matters worse, most court decisions do not consider the effects divorce or separation has on your tax situation, which is why it's always a good idea to speak to an accounting professional before anything is finalized.

Furthermore, tax rules regarding divorce and separation can and do change - as they recently did under tax reform. Divorced and separated individuals should be aware of tax law changes that took effect in 2019.

Who is Impacted
The new rules relate to alimony or separate maintenance payments under a divorce or separation agreement and include all taxpayers with:

Divorce decrees.
Separate maintenance decrees.
Written separation agreements.
Tax reform did not change the tax treatment of child support payments that are not taxable to the recipient or deductible by the payor.
Timing of Agreements
Agreements executed beginning January 1, 2019, or later. Alimony or separate maintenance payments are not deductible from the income of the payor spouse, nor are they includable in the income of the receiving spouse if made under a divorce or separation agreement executed after December 31, 2018.

Agreements are executed on or before December 31, 2018, and then modified. The new law applies if the modification does these two things:

Changes the terms of the alimony or separate maintenance payments.
Specifically states that alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.
Agreements are executed on or before December 31, 2018. Before-tax reform, a taxpayer who made payments to a spouse or former spouse could deduct it on their tax return. The taxpayer who receives the payments is required to include them in their income. If an agreement was modified after that date, the agreement still follows the previous law as long as the modifications do not:

Change the terms of the alimony or separate maintenance payments.
Specifically state that alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.
Tax reform made an already complicated situation even more so. Don't hesitate to call if you have any questions about the tax rules surrounding divorce and separation.

01/25/2021

Important Tax Changes for Businesses:

Standard Mileage Rates
In 2021, the rate for business miles driven is 56 cents per mile, down 1.5 cents from the rate for 2020.

Section 179 Expensing
In 2021, the Section 179 expense deduction increases to a maximum deduction of $1,050,000 of the first $2,620,000 of qualifying equipment placed in service during the current tax year. This amount is indexed to inflation for tax years after 2018. The deduction was enhanced under the TCJA to include improvements to nonresidential qualified real property such as roofs, fire protection, and alarm systems and security systems, and heating, ventilation, and air-conditioning systems. Also, of note is that costs associated with the purchase of any sport utility vehicle, treated as a Section 179 expense, cannot exceed $26,200.

Bonus Depreciation
Businesses are allowed to immediately deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before January 1, 2023, after which it will be phased downward over a four-year period: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% in 2027 and years beyond.

Qualified Business Income Deduction
Eligible taxpayers are able to deduct up to 20 percent of certain business income from qualified domestic businesses, as well as certain dividends. To qualify for the deduction business income must not exceed a certain dollar amount. In 2021, these threshold amounts are $164,900 for single and head of household filers and $329,800 for married taxpayers filing joint returns.

Research & Development Tax Credit
Starting in 2018, businesses with less than $50 million in gross receipts can use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.

Work Opportunity Tax Credit (WOTC)
Extended through 2025 (The Consolidated Appropriations Act, 2021), the Work Opportunity Tax Credit is available for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire.

Employee Health Insurance Expenses
For taxable years beginning in 2021, the dollar amount of average wages is $27,800 ($27,600 in 2020). This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.

Business Meals and Entertainment Expenses
Taxpayers who incur food and beverage expenses associated with operating a trade or business are able to deduct 100 percent (50 percent for tax years 2018-2020) of these expenses for tax years 2021 and 2022 (The Consolidated Appropriations Act, 2021) as long as the meal is provided by a restaurant.

Employer-provided Transportation Fringe Benefits
If you provide transportation fringe benefits to your employees in 2021, the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $270. The monthly limitation for qualified parking is $270.

While this checklist outlines important tax changes for 2021, additional changes in tax law are likely to arise during the year ahead. Don't hesitate to call if you have any questions or want to get a head start on tax planning for the year ahead.